Category Archives: Buying tips for your NYC apartment

Manhattan market reports as of April 19

According to the latest market reports, the average listing price is down about 10% compared to last year, but 25 contracts over $4 million were signed last week. $849 million dollars of contracts have been signed in the $4million and up segment since the last week of March which is the best start of the Spring market since 2015. What do these seemingly differing numbers mean? The luxury/new development market has been in a buyer’s market for about 2 years now. As a result, the buyer and seller expectations are more inline with each other than lower price points. For the last year or so, new developments have been open to negotiations. Additionally, some projects have been paused or never got off the ground. So the existing inventory is being sold.

This is unlike the below $4 million price market where sellers’ expectations needs to adjust to the current reality and that they will not achieve the same prices that were reached a year ago. Manhattan buyer’s market tend not to last very long.

Additional data here

Broker confidence up according to latest study

The Author-  Brian Silvestry , a licensed real estate broker, has been selling residential and commercial real estate since 1999. He has sold in every neighborhood from Battery Park City to Washington Heights.

 

Current Manhattan residential market conditions

As days on the market increases for most residential real estate, the consensus is that the Manhattan residential market is in buyer’s market. New realities are setting in for sellers and not just in the luxury market but in all price ranges including starter homes. In 19 years of selling residential real estate, I have seen this cycle a few times already. The last time through, the market forces were accelerated by the financial crisis. This time around perhaps the winds behind the sails may be the tech bubble as well as the Tax Reforms and Jobs Act and rising interest rates.

But in any case, a buyer’s market tends to not last too long so while some buyers are waiting it out and deciding to rent instead, now maybe the time to make that purchase, knowing that finding the absolute perfect time to buy may be like trying to catch the bottom of the stock market. One thing is for sure is that with a little patience and good negotiation, a purchase now can lead to serious appreciation once the buyer’s market turns again into a seller’s market.

Also I think understanding that the Manhattan property values are not decreasing across all asset classes. Townhouses in Harlem continue to see steady sales and modest appreciation. Also, try finding a 6-12 family property for sale uptown with upside potential. There is very little for sale. In these markets both investors and end users are pouring in and there is a lack of inventory. Recently, I had a 8 family for sale at 313 W 138th street and there was a high level of interest and the property went to contract at over asking price within 1 month of listing.

The Author-  Brian Silvestry , a licensed real estate broker, has been selling residential and commercial real estate since 1999. He has sold in every neighborhood from Battery Park City to Washington Heights.

How to avoid taxes on the sale of your Manhattan investment property

One of the easiest way to save money on the sale of your Manhattan investment property is to do a 1031 exchange also known as a like kind exchange. The gist is you sell an investment property, and purchase a property of similar value. The property must close within 6 months of the sale of the first property and you need to identify it within 45 days of the closing of the sale.

Let’s take a look at an example.

You have an investment condo worth $2 million that you have owned for 20 years that you bought for $500,000. Instead of paying tax on the profit, you buy another property worth $2 million and roll over the gain. The purchase can be another condo, multi-family, vacant land etc… When you close the sale of the condo, you have 45 days to identify potential purchases and 6 months to close or you lose the opportunity to do the 1031 exchange. Speak to your CPA and attorney for details on how to execute this process. But once you execute the purchase, you trade one property for the other and have deferred the taxes. With the typical Manhattan condo investment property returning 2-3%, you can probably buy another property either in New York or another statement that will return two to three times the net cash flow. In addition, if you have owned an asset for a number of years, it is likely you have depreciated it possibly even to the max. By starting over, you can begin depreciating anew. Again, speak to your CPA.

Keep in mind that a 1031 exchange is not for your primary residence but rather a property that you have rented it as an investment. But with this technique in your arsenal, you have the ability to sell and defer the taxable gain!

The Author-  Brian Silvestry , a licensed real estate broker, has been selling residential and commercial real estate since 1999. He has sold in every Manhattan market from Battery Park City to Washington Heights.

Understanding buyer due diligence on a Manhattan residential purchase

Once a contract is sent out, the buyer’s attorney and associates do their due diligence. What exactly happens?

The buyer in the purchase of a Manhattan condo or co-op will examine the last 2 years financials, the original offering plan, any amendments to the offering plan, board application package, house rules and may even read the minutes of the Board of Directors meetings.

When I almost purchased a co-op on the Upper east side, my CPA actually reviewed the building financials and told me that the building was losing money and my maintenance will increase over time sharply and advised me not to buy. So your attorney or even your CPA will try to steer you clear of any building with finance issues at the least.

Also when they look through the rest of the building documents they are looking for any hint of a major expense on the horizon or perhaps a troublesome neighbor. They may even send their own questionnaire to the building management. I have seen this done by one attorney.

If you were buying a townhouse, they would look at the certificate of occupancy to see if it is consistent with the current layout as well as any inspections that you may have conducted that would turn up any major potential expenses that you may incur like a roof, or mechanical systems.

During this period of time, they will review the contract sent by the seller’s attorney and will also make comments or add a rider to the contract to best protect your interests.

Typically, the due diligence period will take about a week or so, and once completed the lawyer will give their approval/advice to you as the buyer so that you may sign.

The Author-  Brian Silvestry , a licensed real estate broker, has been selling residential and commercial real estate since 1999. He has sold in every Manhattan market from Battery Park City to Washington Heights.

Differences between co-ops and condos part 3

In this continuing series we will take a look at a couple more differences between co-ops and condos.

1- Co-ops tend to be located in prewar buildings while condos tend to be newer, shinier and more full of amenities. So if you love prewar lobbies, crown moldings and other details of prewar buildings, you probably will be looking at more co-ops. Almost all new offerings in the last 10 years plus are condos so condos tend to satisfy the wants of Manhattan buyers who are looking for newer buildings with amenities like swimming pools, roof decks, bowling or golf simulators. Some co-ops will have nice amenities as well but very few co-ops have been built in the last 20 years or so.

2- If you are a foreign national or US based investor, condos will most likely be your choice. Co-ops tend to examine a plethora of documents as previously mentioned including US credit. Since a co-op can turn down someone without providing a reason, if you are foreign national purchasing as a primary residence or a pied-a-terre, your safer bet will be a condo. Also, if you are purchasing for investment, almost all co-ops will require you live there first then there will be restrictions for how long you can rent.

The Author-  Brian Silvestry , a licensed real estate broker, has been selling residential and commercial real estate since 1999. He has sold in every Manhattan market from Battery Park City to Washington Heights.

Understanding the mortgage process in Manhattan

Many buyers and sellers do not understand the mortgage process unless they have recently purchased a Manhattan apartment. Here is an overview of the main steps in the loan process.

1- Application
2- Appraisal
3- Approval
4- Clear to close
5- Closing

When you put in a loan application to purchase a Manhattan apartment, they will typically ask for a plethora of documents including last 2 years tax returns, W2s, employment letter and bank statements. Simply, the bank wants to see that you have enough income to support the loan that you are applying for and that you have the down payment money plus an appropriate amount of reserves for post closing.  After the last financial crisis, banks are much more cautious.  So you have a stable job history, make at leasat 2.5 times or more the monthly mortgage, plus maintenance plus any installment debt that you have, have good credit and 20% down payment, and you are more or less in good shape.

During the loan application, the bank will send out an appraiser to confirm the value of the property is equal to or greater than the price on the sales contract. Assuming that all of your documents check out and the appraisal comes back okay, you will receive an approval. Sounds simple but from when you get your application in, this process can take from 2 to 4 weeks on average. Once you have your approval, you can close right? Not exactly.

Once your loan commitment (bank approval) is issued, there will be conditions to the commitment that the bank will require to clear the file to close. These can be as simple as a letter explaining a large deposit in your bank account or obtaining homeowner’s insurance. Sometimes these conditions can be quite numerous. Once when I sold an apartment on the upper west side, the lender required the purchaser to show 12 months of cancelled checks for rent that they paid for the previous year. When you submit all of the items required the bank will clear the file to close. This can take another 30 days or so and when that is done the bank is ready to close!

The Author-  Brian Silvestry , a licensed real estate broker, has been selling residential and commercial real estate since 1999. He has sold in every Manhattan market from Battery Park City to Washington Heights.

 

 

Differences between a Manhattan co-op and condo Part 1

There are many differences between a Manhattan co-op and condominium and in this first installment we will explore 2 of them.

1- Co-ops can turn down the application of a prospective purchaser without any reason given and that’s it, the buyer can not complete the purchase.  Any fees or costs incurred are not reimbursed and that’s it. A condo grants a waiver of the right of first refusal when they take an application from a prospective purchaser. The only time that they may exercise the right of first refusal is when an apartment is being sold far below market. Instead of letting the sale go forward, they can purchase the apartment.

2- Co-ops more closely scrutinize the financial wherewithal of prospective buyers than condos. So you need to have a down payment of 20-25% plus a debt to income ratio of no more than 28% plus stable job history, and excellent credit. A condo may run credit but they are satisfied with you obtaining a loan commitment or purchasing cash. They are not going to turn you down because you do not make enough money.

The Author-  Brian Silvestry , a licensed real estate broker, has been selling residential and commercial real estate since 1999. He has sold in every Manhattan market from Battery Park City to Washington Heights.

What a Manhattan buyer broker will do for you

Here are a few simple things that a good real estate broker will do for you when assisting you with a purchase of Manhattan property.

1- Help you to get a pre approval or recommend you to a lender. Most experienced Manhattan real estate brokers will be able to recommend you to a lender that will help you to at least have a pre approval on hand when you go to make an offer.

2- Interpret data- These days, the general public has access to data from many sources including streeteasy, zillow, and trulia. What may be missing is the interpretation of the data and in some cases that can best be done by an experienced real estate broker. Why did an apartment sell below market value? What about a foreclosure or auction purchase? Is the market going up or going down? What is an appropriate amount to seek to negotiate the asking price? All questions that I have heard and there are very specific answers depending on the market conditions and the individual property.

3- Do some due diligence for you. Your lawyer will do due diligence for you once you have an accepted offer. They search for potential issues with neighbors or a major capital project coming down the pipeline by reading the minutes of the Board meetings. But a good real estate broker knows the questions to ask the seller’s rep to get a lot of information that will save you the time and cost of having the attorney find out later or worse, you find out after you move in. Why are the common charges and taxes so high on this given building? What other construction projects are happening nearby that may affect the views of the apartment?

4- Be familiar with local condo projects, new store openings or anything else that may affect the future value of your purchase. No one has a crystal ball to know what will happen in the future. But an experienced Manhattan broker will be able to guide you to the neighborhoods that will see the greatest appreciation if you are looking for an investment. Or they can tell you if you are renovating a townhouse, what the layout most desired by buyers would be as well as the type of finishes or amenities that you should include.

5- Protect your interests always and especially ahead of their own. Of course when you close, the real estate broker gets paid but there must always be a clear indication that they will protect your interests ahead of their own. A few years ago, a client asked me what I thought of a potential townhouse. I told him that the square footage was incorrect because it included the below grade which does not count and the price per square foot was too high. Ideally, your Manhattan buyer broker is going to realize that he must protect your interests even if that means you do not buy.

Obviously, there are many other things that a buyer broker will do for you when assisting you to purchase a co-op, condo or townhouse in the NYC market but these are 5 important ones.

The Author-  Brian Silvestry , a licensed real estate broker, has been selling residential and commercial real estate since 1999. He has sold in every Manhattan market from Battery Park City to Washington Heights.

How to choose a real estate attorney

Let’s assume you are doing a residential purchase or sale and need a Manhattan real estate attorney to represent you. How do you find one and what should your criteria be? Let’s take a simplified look at what they do first to assist the process.

On a purchase, your attorney will review the proposed contract and examine the financial information of the co-op or condo building which might entail going to the building to read the minutes of the Board meetings. If there is some project coming up or a noisy neighbor that is wrecking havoc,  it might show up in these minutes.  Your attorney will meet you to sign the contract and fedex/messenger the contract and deposit check to the seller side. After that, assuming it’s not a complicated transaction that will be about it until you go to closing and then he will reconcile the numbers at the closing table and provide you with a closing statement.

On a sale of a Manhattan co-op/condo, the attorney or assistant will prepare the NYS contracts, then will negotiate any changes proposed by the buyer side. You will meet your attorney once the buyer signs and counter sign the contract. If there are issues with the mortgage or closing, the attorney will intercede and if not your attorney will attend the closing and reconcile the numbers with the other side.

Attorneys charge generally as low as $2000 for this transaction and generally an average fee is closer to $3000 or more.

The easiest way to find a good real estate attorney is to ask a friend, family member or your real estate broker for the name of someone that they have used and had a good experience.

You want to make sure that any attorney you use specializes in real estate so that you have a true expert on your side. Sometimes your family attorney also “does” real estate transactions but if there is an issue along the way, experience in doing many transactions may be an asset that you are happy that they have or may hurt you if they do not. So choose someone with experience.

Find out if there is an assistant or someone that you can speak to in case you need a quick question answered. If your attorney spends all day in court and is unreachable by phone/email, it may add stress unnecessarily to the process. Most attorneys will have staff and in some cases they will be able to answer your questions.

Lastly, while you might be recommended to a big name law firm, ask who will be the one handling your transaction. A big name firm that delegates you to a junior attorney or paralegal may not be the wisest choice. Much in the same way, a big name real estate brokerage that passes you off to the 3rd assistant may also leave you feeling that you are not receiving the service you expect.

So while the description I have given of what an attorney is very simple, it is not easy and you never what bumps you will hit on the way so it’s always best to have an expert on your side. To find the right person may take a little bit of research.

The Author-  Brian Silvestry , a licensed real estate broker, has been selling residential and commercial real estate since 1999. He has sold in every Manhattan market from Battery Park City to Washington Heights.

How to negotiate the best price on Manhattan property

When trying to negotiate the best price for a Manhattan property, there are some items that you can control/interpret yourself and some that you will need an experienced broker to assist you.

For starters, you want to have the below info

1- days on market
2- previous offers
3- current market conditions
4- owner’s motivation
5- nearby construction that will affect light and views

Armed with this information, you at least have a starting point but you will need your broker to interpret the following:

1- recent sales and how they compare with the Manhattan property you are considering
2- adjustments for view, light, condition,
3- how the market conditions affect this particular unit

With your basic information plus your broker’s input, you can make your offer. To negotiate the best possible take the below approach.

1- Start with a reasonable offer. If you start too low, likely the seller will not counter. In some cases, when the DOM is high like 300 days or more, you may be able to make an offer than is lower.
2- Have your broker explain to the other side how you calculated the offer price that you gave.
3- Be willing to either walk away or wait if the counter offer is not to your liking. If you wait long enough a price reduction 1-2 months later may be even lower than the counter offer that you received.

Usually, when a listing is fresh, the seller is less likely to discount the price but as time goes on and reality sets in, they may be more willing to negotiate.

The Author-  Brian Silvestry , a licensed real estate broker, has been selling residential and commercial real estate since 1999. He has sold in every Manhattan market from Battery Park City to Washington Heights.